A military administration was set up in the German-occupied eastern territories — Lithuania, Curonia; Bialystok, Suwalki and Grodno Districts — in 1915. This territory was directly subordinate to the Commander of the Eastern Army and, in the abbreviated form, was referred to as the Oberost territory (Ger. das Land Ober Ost). German occupation authorities subjugated the whole Lithuanian economy for supporting the German economy and sustaining the German army. For that purpose, not only agricultural production, equipment and raw materials, but circulating silver roubles were used as well. The new authorities decided to collect roubles from residents, exchanging them into German paper money. With this end in view, a decision was taken in 1916 to issue a special currency.
The adoption of the new currency was assigned to the East Bank of Trade and Commerce with a branch in Poznań. This bank organised a special credit fund — Darlehnskasse Ost, which was to perform the functions of a bank of issue in the eastern territories occupied by Germany, except in Poland. A branch of Darlehnskasse Ost in Kaunas was founded on 26 June 1916, which was mandated with issuing into circulation the first currency — rubles, which were else referred to as Ostrubles (although the word “Ost” was not mentioned on the issued currency units). Ostrubles were declared the sole legal tender in Lithuania (the Ostruble was equated to the German Mark at the exchange rate of 1:2). Iron kopeks circulated beside paper currency units.
1, 3, 10, 25 and 100 rouble banknotes were printed in large mintages. The Darlehnskasse Ost’s rubles were double-sided, with inscriptions in four languages: German on the front, Lithuanian, Polish and Latvian — on the back. The print and ornamentation were simple; the paper quality — poor. As a result, these currency units were often counterfeited. Vilnius, Kaunas, Šiauliai, Riga, Liepaja were famous counterfeiting centres.
Coins were struck in Berlin and Hamburg. The inscriptions on coins were in German and Russian.
The Darlehnskasse Ost issued paper money without being concerned about their backing. Osts were backed by Russian roubles, securities, etc. Despite the backing, this currency had no basis of precious metals and was not a hard currency.
Lithuanian residents soon figured out the contrivance of the occupation authorities and did not rush to exchange real silver into the surrogate currency. Then German authorities decided to gradually withdraw Ostrubles from circulation. In 1917, the Darlehnskasse Ost was separated from the East Bank of Trade and Commerce to be reorganised into a separate credit institution. Moved from Poznań to Kaunas, it proceeded with the issuance of paper money. Local Marks (or Ostmarks) began to be printed instead of roubles in 1918. The Ostmark was equated to the Mark at the exchange rate of 1:1.
Unbacked Ostmarks in the 0.5, 1, 2, 5, 20, 50, 100 and 1,000 denominations were issued in huge amounts. Their ornamentation is close to that of the ruble. For some denominations, the same clichés are likely to have been used. The inscriptions were in German, Latvian and Lithuanian (in Poland, a separate currency unit — Polish Marks — was printed). The back of the Ostmarks contained a guarantee in the future to exchange Darlehnskasse Ost units into Reichsmarks. Supposedly, this was to strengthen confidence in the new currency.
The entrenchment of the Ost currency in post-war Lithuania (already independent) was due to the loans granted to Lithuania by Germany. After Germany lost World War One (it capitulated on 11 November 1918), its armed forces began to withdraw from Lithuania. Compelled at that time to summon all forces to fight against its external enemies, the Government of the Republic of Lithuania was unable to adopt an own currency (because of a lack of funds) and was therefore obliged to use depreciated Ostmarks. As the Provisional Government of Lithuania signed a special agreement with the Darlehnskasse Ost on 30 December 1918, the latter entrenched itself as Lithuania’s bank of issue, while the Osts, issued by it, became legal tender and circulated until the adoption of the own currency, the litas (in 1922).
In 1919, the Lithuanian government changed the official name of the currency by a special order: the Ostmark was named auksinas, the Pfennig — skatikas. Huge amounts of Ostmarks (auksinas) led to unprecedented hyperinflation: the rate of this currency vis-à-vis hard currencies (the dollar) fell drastically, while the prices of goods rose fast. In the period of the fights for independence, the rate of the currency fell not by a few, but several thousand times. Thus, for example, 1 dollar on 2 January 1918 was equivalent to 5.09 Ostmarks, while on 1 November 1922 — already 4,550 Ostmarks. Hence, the key role in the currency circulation of the State in the process of establishment was played by German currency, which inflicted huge losses on the Lithuanian economy.
After the adoption of the litas, Ostrubles and Ostmarks were by 1 January 1923 to be replaced with litas at an exchange rate, which was fixed by the Minister of Finance, Trade and Industry on a weekly basis or more frequently. Later, the term for the replacement was extended.